Elon Musk vs. OpenAI: Insights from Legal Experts on the Ongoing Debate

The lawsuit filed by Elon Musk against OpenAI, CEO Sam Altman, and President Greg Brockman in California has left legal experts racing to interpret its significant claims. The allegations include breach of contract, breach of fiduciary duty, and unfair competition, all centered on the assertion that OpenAI prioritized profits in developing artificial general intelligence (AGI) over its obligation to serve the public good.

Legal analysts Anat Alon-Beck, an associate professor specializing in corporate law at Case Western University, and James Denaro, an attorney and chief technologist at CipherLaw, which focuses on AI and intellectual property law, provided insights on the case.

Denaro highlighted Musk’s intent to compel OpenAI to open-source its research and technology. During OpenAI’s founding—when Musk was a financial backer—he expected the organization to maintain an open-source ethos. However, Denaro noted that enforcing such vague expectations as official contracts would be challenging.

"For example, was there a mutual agreement that OpenAI could never develop proprietary, for-profit products? Or could it operate with both open-source and closed-source technologies?" Denaro posed. He indicated it might be difficult for a court to interpret these informal agreements, which lacked clarity in scope and timeline, as legally binding contracts.

Denaro characterized the breach of contract claim as “uncertain,” describing the alleged ‘Founding Agreement’ as more of a broad consensus than an explicit contract. While Musk has expressed his dissatisfaction with OpenAI publicly, Denaro suggested that the basic agreements likely do not prohibit OpenAI from pursuing for-profit opportunities.

Despite this, Musk presents a compelling policy argument: If a non-profit company can transition to a for-profit model while leveraging public donations, it could create problematic implications for tech startups. Although the court may not be equipped to address the complexities of shifting corporate structures and intellectual property transfers, this situation raises essential legal and policy considerations.

Alon-Beck commented on Musk's motivations, stating that, as the founder of competitor X.ai, he possesses clear “incentives to sabotage” OpenAI. She expressed skepticism about the likelihood of a sympathetic hearing, suggesting the legal action should be filed in Delaware, where OpenAI's corporate entities are established. Musk appears to be avoiding Delaware due to past unfavorable judgments, potentially leading to jurisdictional conflicts that could escalate to the Supreme Court.

Regardless of the venue, Denaro stressed that “handshakes and personal expectations are notoriously difficult to enforce in court.” Ultimately, the outcome of Musk's case against OpenAI will depend on whether the informal agreements can be interpreted and enforced, which carries significant implications for OpenAI.